How much can I have in my savings account before/during Chapter 7?

[cupcake]

Today starts my six-month countdown to filing for Chapter 7. I have to wait six months because my income is higher than my state's median income. My employer has reduced my income so that I will be able to file in six months.

Anyway, I am wondering how much I am allowed to have in a savings account from this point forward. Because my income will be less for some time I withdrew a portion of my 401(k) in case of an emergency - sort of a cushion. I guess. It was a now or never kind of thing. If something came up in say three months (or whatever) and I needed some cash I wouldn't be able to withdraw anything because it would have increased my income and my six month period would have to start over again.

So, anyone know how much I can have in savings without it being excessive? Can I keep it there indefinitely even through the Chapter 7? My attorney told me not save up "too much" money - he didn't give me a specific dollar amount. Also, if I can't keep any (or very little) what do I do?

Thanks!

[soleprop]

check the exemptions for your state - you can usually protect up to a certain amount in your bank account. no idea what state you're in so can't help you with specifics.

[cupcake]

^I am in Michigan. I live in an apartment and do not have a home to protect.

Michigan allows use of the federal exemptions, so would this apply toward cash in a savings account?

522(d)(5) - $1,075 of any property, and unused portion of homestead up to $10,125

[soleprop]

yes if you're filing using the federal exemptions. if you want to file using the MI exemptions instead, you could use the following MI exemption:

Wages
60% of earned but unpaid wages for head of household; else 40$; head of household may keep at least $15 per week plus $2 per week per non-spouse dependent; other may keep at least $10 per week (600.5311)

[Help!]

If I were you, I'd make my 401K my only savings (it is untouchable during BK) so you can use your exemptions on other things.

[cupcake]

yes if you're filing using the federal exemptions. if you want to file using the MI exemptions instead, you could use the following MI exemption:

I don't understand the Michigan exemption - what is the time frame for those figures, six months? So if I used the Michigan exemptions and had an income of $40,000 annually (as an example) I could have $12,000 saved if I am the head of household? Would I be considered the head of the household if I am the only one in the household?

If I were you, I'd make my 401K my only savings (it is untouchable during BK) so you can use your exemptions on other things.

The problem with that is that if I had an emergency and needed money I wouldn't be able to touch any of it from this point forward without affecting my income unless I borrowed from it. I couldn't handle another monthly payment.

[PoorGrammyinBK7]

Good advice from Help! - I would listen to that!

[Help!]

The problem with that is that if I had an emergency and needed money I wouldn't be able to touch any of it from this point forward without affecting my income unless I borrowed from it. I couldn't handle another monthly payment.

Understandable. If you don't have much to exempt, you might as well exempt your savings. If you have more equity in your property than you can exempt, you might consider a prepaid VISA gift card for emergencies. It does not require a SS# and still has protection in the event of loss or theft.

[FreshLikeADaisy]

I don't understand the Michigan exemption - what is the time frame for those figures, six months? So if I used the Michigan exemptions and had an income of $40,000 annually (as an example) I could have $12,000 saved if I am the head of household? Would I be considered the head of the household if I am the only one in the household?

Cupcake, exemptions have no time frames as such; it's all about what you personally possess on the day you file. Your unused homestead is a wildcard, meaning that it can be applied to any personal property, including a bank account.

So the quick answer to your original question is, make sure that your savings account is lower than the exemptions you have left after you've exempted everything else (your car, your jewelry, etc.).

Here's a hypothetical example. Let's say your state's total personal property exemptions are $10,000, including any wildcard, unused homestead, whatever. If you have a bank acct of $10,000, that's no good because you still have to exempt your checking account, clothing, your books, your DVDs, your car, all that. So let's say you evaluate your property and come up with a figure of $4000 that covers your car and other possessions. In this hypothetical example, that would make the maximum amount you could keep in your savings account $6000. If you tried to keep more, the difference would eventually be seized by the trustee.

So for the most accurate answer to your question, you will first need to value all your assets, and then subtract that amount from your state's available exemptions to see what's left. The Nolo book is really good about explaining how to do this, and there's a lot of info on this board too. Good luck!!!